Short Sale

           Washington Foreclosure Prevention Resource Guide (PDF)

What is a Short Sale?

A short sale can be a solution for homeowners who need to sell, and who owe more on their homes than they are worth. A homeowner is ‘short’ when the amount owed on their property is higher than current market value.
A short sale occurs when the homeowner’s mortgage company (or companies) agree to accept less than the full balance of the loan at closing. A buyer closes on the property, and the property is then ‘sold short’ of the total owed on the mortgage.

Banks and lenders have become much more negotiable when it comes to this type of transaction. The following is a list of situations where a lending institution might work with you:

Financial Hardship

–There is a situation causing you to have trouble affording your mortgage payments. Unemployment,
divorce, medical challenges or the death of a spouse would all be considered hardship.

Monthly Income Shortfall

– Your monthly income no longer meets your obligations. You are late and/or behind on your mortgage payments.

Property Depreciation

The value of your property has fallen below what is currently owed on the mortgage.

Short sales can be beneficial to all parties involved: homeowners, lenders, real estate agents and investors. By accepting a short sale, the lender decreases their potential for loss. A short sale also minimizes the costs associated with foreclosures by the lender. Homeowners avoid permanent damage to their financial record while buyers benefit from a good deal on their new home. Real Estate Companies are compensated for their work to get the property sold.

The key to the short sale process is timing. Ideally, The Schmaltz Real Estate Group should be contacted fter one payment is missed and you have no means to make subsequent payments. Foreclosure proceedings usually start with a formal demand for payment in the form of a Notice of Default letter. Also, in many instances, lenders have programs that might help such as a Deed in Lieu of Foreclosure or Cash for Keys. The Schmaltz Real Estate Group can quickly assess your situation and see how the short sale process can be put to work for you.

What happens to me financially if the bank forecloses on my Home?

When you receive a notice that your home has been foreclosed you must vacate the premises immediately. Failure will result in the county Sheriff evicting you from the property. Once the bank takes possession of the property they will begin to market it as a REO, Real Estate Owned property. If there is a disparity in what money was obtained and what was owed, the bank has a legal right to obtain a deficiency judgment
for the difference.

What do I have to pay at closing if I do a short sale?


What Do I have to pay the Real Estate Company?

Nothing, our fees are paid by the bank as part of the short sale.

In a Short Sale what happens to my credit?

A short sale will have far less impact on your credit score than a foreclosure or bankruptcy. If you are
current on all your bills and still making your mortgage payments, your credit score should not suffer greatly.

What is my tax liability?

Here is a link to The Mortgage Forgiveness Debt Act of 2007. If you participated in a short sale and your lender gave you a 1099 for the amount forgiven, you will need to use IRS Form 982 (Download it HERE). This form would show that the cancellation of debt income is being excluded.

Contact your CPA for more information.


All material presented herein is intended for information purposes only and is furnished from sources deemed reliable. While this information is believed to be correct, it is represented subject to errors, omissions, changes or withdrawal without notices. No representation is made by Schmaltz Real Estate Group nor is any to be implied as to the accuracy thereof.